The mortgage paradox: why rates do not decrease even if ECB rates are stable and inflation has fallen

Many families are facing a paradox: the European Central Bank has kept the cost of money at 2% and, by January 2026, inflation in the euro area has fallen to 1.7%. Yet, monthly payments are not decreasing as expected.

Where does the gap between the announcements from Frankfurt and what is paid each month come from? The explanation lies in the transmission channels of monetary policy, which proceed with slowness and in a heterogeneous manner from market trends to the conditions applied by institutions.

After a series of cuts at the end of 2024, the ECB Governing Council chose a "tactical pause", deciding meeting by meeting without committing in advance. With moderate growth and inflation now close to the target, the urgency for further rapid cuts has diminished. 2026 thus looms as the year of stabilization, not a reversal.

On the variable side, the three-month Euribor at the end of February stood between 2.0% and 2.1%: levels well below the peaks of 2023, making payments finally more "manageable", within an expected range for the year between 2.0% and 2.9%. Will we see historical lows again? It is unlikely that the anomalies of negative rates will return soon: an Euribor between 2% and 3% is now the new normal of a balanced economy.

So why are payments struggling to decrease? First of all, the recalculation of indexed loans accounts for a physiological delay of 1-3 months and the spreads applied by institutions weigh significantly on individual proposals.

Moreover, for fixed-rate mortgages, the reference parameter (IRS) looks at the long term: it incorporates inflation expectations and risk premiums, not always moving in perfect harmony with the ECB's decisions.

Despite these inertias, the credit market today offers notable opportunities, with offer criteria remaining stable and favorable for customers with solid incomes. Data from the Bank of Italy indicate an average APR on new loans around 3.7% by the end of 2025, against a gradually but steadily recovering demand.

The real opportunity of 2026 is the substitution: those who signed a fixed rate during the peak tension months between 2023 and 2024 can now significantly reduce their installment, without notary fees, benefiting from average levels that are over one percentage point lower.

The choice between fixed and variable depends more than ever on personal risk profile: the fixed remains a valuable stability policy for tighter family budgets, while the variable can reward those with ample financial margins who are ready to seize any favorable market windows.

To protect oneself and obtain competitive conditions, a method is needed: go beyond the nominal rate by carefully comparing the APR, actively negotiate the spread, and monthly monitor the fluctuations of Euribor and IRS.